On Our Radar: Inequality Moves Beyond Wage

Although a proposed increase in the US minimum wage stalled in Congress in early 2014, inequality has not lost momentum, and if anything, is poised to remain high on the global agenda. The Initiative for Responsible Investment at Harvard held a webinar on “Income Inequality and the Potential Risk to Investors” earlier this year, concluding that any company that furthers inequality could face substantial revenue losses from disengaged employees, lawsuits and reputational costs. McDonald’s echoed this sentiment by including inequality as a material risk in its latest 10-K. Meanwhile, the International Monetary Fund has become an unusual, though strong advocate of the need for countries to address income inequality because of the “dark shadow it casts across the global economy.”

Relevance to business has been primarily around the pay spectrum – minimum wage and executive pay. Gap Inc., for example, announced a wage increase in line with the proposed bill in Congress, a stance that others, like Walmart and Starbucks, have hinted they might follow. But we are now beginning to see influential stakeholders, including corporates, address root causes of inequality that go beyond pay. Ford, General Motors, and Apple have committed to revise their hiring practices to avoid discriminating against the long term unemployed. Starbucks has announced that it will provide a free online college education to thousands of its US workers with no strings attached at a time when the the country is debating the rising cost of college tuition and resulting debt burden on students. And the International Labor Organization is pressuring the United Nations to include ‘full and productive employment’ as a central goal of the post-2015 Millenium Development Goals agenda.

What to look for: Further signals that the inequality conversation as it relates to the private sector evolves beyond wage into related root causes (e.g. expanding access to education and healthcare, job and skills training for current, future and former employees, etc.) especially as the companies impacted and implicated move beyond the service sector alone.